Tags: US | Retailers | Holidays

Retailers' Stores Thinly Stocked; Profits Won't Be

Monday, 28 Dec 2009 03:19 PM

 

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Retailers have thin inventories after coming out of Christmas with slightly better-than-expected sales.

Some retailers kept inventory so low they've had to bring in new merchandise to restock shelves, a rare move this soon after Christmas.

That's good news for their bottom lines. But it means slim pickings for shoppers hoping for after-Christmas clearance sales. Shoppers looking for big sales should act quickly because there are relatively few leftovers to clear out.

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"Retailers are much more nimble this year," NPD analyst Marshal Cohen said. "Their 'Plan B' is to have new receipts at the ready."

Cohen said he noticed J. Crew and Coach were two that had restocked shelves with new items last week.

Because their ordering was in line with weak demand, retailers were able to sell more items at higher prices, which is critical to profits. Last year, profits were hammered by fire-sale discounts to get rid of the excess.

"The latest holiday shopping season wasn't a rip-roaring success, but at least it met or slightly exceeded expectations," said John Lonski, chief economist of Moody's Capital Markets Research Group. "Consumer spending is indeed in a recovery mode, which brightens prospects for 2010."

Spending rose 3.6 percent in November and December, according to MasterCard Advisors' SpendingPulse, which estimates all forms of payment including cash. Adjusted for an extra shopping day between Thanksgiving and Christmas, the number was closer to a 1 percent rise. That was still better than the flat sales analysts had predicted.

Some retail stocks rose on Monday. American Eagle Outfitters shares rose 48 cents, or 3 percent, to $16.80 during midday trading. Macy's Inc. shares rose 39 cents to $17.96. J.C. Penney shares rose 37 cents to $27.39.

Amazon.com Inc.'s shares rose $2.23 to $140.70, buoyed by SpendingPulse numbers that showed online sales rose 15.5 percent.

The Dow Jones U.S. Retail Index edged up less than 1 percent.

After-Christmas traffic also appeared to be relatively robust, though it wasn't clear how much people were actually spending.

Roth Capital Partners analyst Elizabeth Pierce visited six malls Saturday in southern California and saw many shoppers without bags. It's likely shoppers who went looking for bargains left without buying much, she said.

Shoppers over the weekend certainly focused on deals.

Bessie Lyles of Huntsville, Ala., arrived at Lenox Square Mall in Atlanta at 6 a.m. to hunt for deals. The 57-year-old left Macy's with two tops, sweaters and two pairs of jeans, including one pair for $4, marked down from $34.

In order to entice shoppers like Lyles through the rest of the week and into January, retailers are expected to steeply discount what leftovers they do have.

After last year's dismal season, when unplanned discounts 70 percent off or more began appearing well before Christmas, retailers vowed they wouldn't get caught that way again.

This year the tight control let retailers mostly keep discounts planned, said FBR Capital Markets analyst Adrienne Tennant.

NPD's Cohen said the season was good enough for most retailers to survive, though many could shutter underperforming stores.

"If a store didn't generate a profit, it will really be under the microscope," he said.

A better picture of how retailers fared during the holiday will be known Jan. 7, when many report December sales.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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